Resolution CMN No. 346 — Lowering Standards for Budget Revenue Anticipation Loans to States, Municipalities, and Autonomous Entities

RESOLUTION NO. 000346

THE CENTRAL BANK OF BRAZIL, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the MONETARY COUNCIL, in a session held on November 12, 1975, having regard to the provisions of Article 4, item VI, of the aforementioned Law and Resolution No. 62/75 of October 28, 1975, of the Federal Senate,

RESOLVES:

I - To determine that financial institutions, when granting loans by anticipation of budget revenue, as provided for in Article 67 of the Federal Constitution, to States, Municipalities, and their respective autonomous entities, must observe the following conditions:

a) The total settlement of the loan may not exceed 30 (thirty) days after the end of the fiscal year in which the operation is carried out;

b) Obtaining adequate guarantees, especially when backed by agreements or conventions for the collection of taxes;

c) The total value of credit operations by anticipation of "current" revenue may not exceed 25% (twenty-five percent) of the revenue to be realized in the fiscal year, minus the amount allocated in the Budget Law for credit operations;

d) The monthly expenditure on the total or partial settlement of revenue anticipation operations, including principal and accessories, may not exceed 5% (five percent) of the revenue calculated in accordance with the preceding item.

II - The granting of loans not covered in the previous item shall be conditional upon proof that, with the intended operation, the internal consolidated debt of the States, Municipalities, and their respective autonomous entities will remain within the following maximum limits:

a) The global amount may not exceed 70% (seventy percent) of the revenue realized in the previous fiscal year;

b) The real annual growth of the debt may not exceed 20% (twenty percent) of the revenue realized;

c) The annual expenditure on the respective settlement, including principal and accessories, may not exceed 30% (thirty percent) of the difference between total revenue and current expenses, realized in the previous fiscal year;

d) In calculating the limits set in items "a", "b", and "c" of this item, the value corresponding to credit operations shall be deducted from revenue, and the interest on public debt shall be deducted from current expenses.

III - Credit operations in which the granting of any guarantees by States, Municipalities, and their respective autonomous entities is also provided shall be subject to the provisions of the previous item.

IV - In addition to the conditions established in this Resolution, financial institutions must observe the specific norms governing their activities, with official banks being permitted to carry out the operations provided for in items I and II, including with States that participate in their share capital, provided they are authorized, in each case, by the Central Bank.

V - Within a maximum period of 10 (ten) days, counted from the date of approval of the loan, the financial institution that grants it must send a copy of the signed credit contract to the Central Bank, accompanied by documentation sufficient to prove that the operation is within the limits fixed in this Resolution.

VI - The granting of aval or guarantee by a financial institution on titles or contracts of any nature, the responsibility of States, Municipalities, and their respective autonomous entities, is subject to prior approval by the Monetary Council.

VII - It is prohibited for financial institutions to accept, in any modality of loan, financing, or refinancing, whether as principal guarantee or as accessory guarantee of the operations they carry out, promissory notes, bills of exchange, exchange letters, or other titles of the kind, issued, accepted, or guaranteed by States, Municipalities, and their respective autonomous entities, corresponding to commitments assumed with suppliers, service providers, or construction contractors.

VIII - The prohibition referred to in the previous item does not apply to titles referring to the acquisition of agricultural machinery, equipment, and implements or road machinery and equipment that have been issued, accepted, or guaranteed by the States, Municipalities, and their respective autonomous entities, provided the limits provided for in item II of this Resolution are observed.

IX - The Central Bank will issue complementary instructions necessary for the execution of this Resolution.

X - Non-compliance with these norms will subject financial institutions and their administrators to the penalties provided for in Law No. 4,595 of December 31, 1964.

XI - Resolution No. 171 of January 22, 1971, and Circular No. 175 of March 23, 1972, are hereby repealed.

Brasília-DF, November 13, 1975

Paulo H. Pereira Lira
President